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What types of investments should risk-adverse elderly investors consider utilizing for safe returns?

For risk-adverse elderly parents, and considering interest rates on the rise, what would be some alternatives to bank CDs? Some options I am considering are broker CMAs and premium money market funds that would not lock the money for periods of time like a CD, but with lower returns. However, another concern would be insurance in case of a banking issue or crisis — could SIPC or FIDC be counted on for such scenarios? There are also US government bonds, notes, and bills that would have some better safety, and corporate bonds would return more, though at a higher risk. There are dividend stocks, though those also have risk of cost basis decline. Are any of these types of investments more recommended over others for risk-adverse elderly investors? Are there are other types of investments we should be considering?

Banking, Bonds / Fixed Income, Choosing an Advisor, Stocks, Insurance
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November 2018

Great question. My first questions would be current age, investment return expectations, and current liquidity needs of the money. Let’s say return expectations line-up with the "risk adverse" tolerance you mentioned, and we assume > Age 70 using the portfolio to supplement social security income. 

I would avoid corporates and dividend stocks. I would recommend utilizing an Income Strategy similar to what we use at Aventine Financial Group, LLC. 

The strategy is a blend of Value Advantage (floating money market), US Treasuries, and individual Investment Grade Municipals keeping duration laddered 1 - 3 years. This done correctly should net the client between 3% - 4% annually given today’s federal funds rate.

The strategy is income producing, preserves the capital invested, and offers the comfort of liquidity.

Frank J. Fiumecaldo, CFP®


Founder & Partner

Aventine Financial Group, LLC

c 848.469.6950 | o 212.269.2512

November 2018
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